Regulations Slow Beneficial Natural Gas Exports

February 22, 2013

Advances in hydraulic fracturing ("fracking") have led to the shale gas revolution and an abundance of affordable liquefied natural gas (LNG). Domestically, the United States has experienced job growth and lower energy prices as natural gas extraction has expanded rapidly. Despite a surplus of LNG, the Department of Energy (DOE) is delaying the authorization of export licenses, which is holding back tremendous economic growth, says Nicolas D. Loris, the Herbert and Joyce Morgan Fellow in the Thomas A. Roe Institute for Economic Policy Studies at the Heritage Foundation.

With more than 2.5 trillion cubic feet of recoverable reserves, the United States has more than 100 years of natural gas, which currently produces 30 percent of America's electricity.

The National Economic Research Associates found that exporting LNG would result in a $10 billion to $30 billion increase in revenue, as well as increases in welfare and real household income.

The Council on Foreign Relations estimates that U.S. gains from trade would total $4 billion annually.

The Environmental Protection Agency's regulation (EPA) is overreaching, as individual states are adequately ensuring that companies operate their fracking operations in a safe manner.

Contrary to some claims, LNG exports will raise domestic prices only minimally and the free market will respond to this demand by increasing extraction and supply.

Due to such large reserves and extraction capacity, exporting LNG is unlikely to elevate domestic prices to a globally set, higher level.

In 2012, the EPA issued its first air-emission rule for methane emissions from fracking despite a roughly 38 to 1 cost-benefit ratio. Congress is also attempting to expand regulation of fracking under the Safe Drinking Water Act. Additionally, the DOE's review process for applications of companies wishing to export LNG takes an inordinate amount of time and considers the transactions based on the "public's interest."

The DOE is currently reviewing 17 applications to build LNG export terminals in the United States as other nations have begun building 20 new export terminals.

Loris believes that the DOE review process and regulations are "onerous" and preventing exporters and the economy from reaching its potential.

To allow export facilities to come online faster, the DOE should lift free trade restrictions on LNG-recipient countries, stop determining the appropriateness of LNG exports based on public interest, and encourage states to become involved in the review and permitting process of export facilities.